/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/200820.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, August 20, 2020, Vol. 21, No. 167 Headlines F R A N C E LAGARDERE SCA: Egan-Jones Upgrades Senior Unsecured Ratings to B VINCI SA: Egan-Jones Lowers Senior Unsecured Ratings to BB G E R M A N Y VERTICAL TOPCO III: S&P Assigns B- Long-Term Issuer Credit Rating I T A L Y CAPITAL MORTGAGE 2007-1: Fitch Affirms Class C Notes Rating at CCsf DEDALUS HOLDING: S&P Affirms B ICR on DXC Acquisition ENI SPA: Egan-Jones Lowers FC Senior Unsecured Rating to BB+ PIAGGIO AEROSPACE: Enters Into Financing Agreement K A Z A K H S T A N SAMRUK-KAZYNA CONSTRUCTION: Fitch Cuts IDRs to BB, Outlook Stable N E T H E R L A N D S AIRBUS SE: Egan-Jones Lowers Senior Unsecured Ratings to BB+ N O R W A Y NORSK HYDRO: Egan-Jones Lowers Senior Unsecured Ratings to B+ NORWEGIAN: Swedish Division Denied Credit Guarantee R O M A N I A KAZMUNAYGAS INTERNATIONAL: S&P Affirms B ICR, Alters Outlook to Neg S P A I N ABENGOA SA: Begins Preliminary Insolvency Proceedings RURAL HIPOTECARIO VIII: Fitch Affirms Class E Notes at CCsf U N I T E D K I N G D O M AMIGO LOANS: Moody's Cuts CFR to B3, Alters Outlook to Neg. NMC HEALTH: Administrators Uncover Most of Hidden Debt PIZZAEXPRESS: Creditors Set to Vote on CVA Proposals on Sept. 4 TATA STEEL UK: S&P Withdraws B Issuer Credit Ratings VITEC GROUP: Egan-Jones Lowers Senior Unsecured Ratings to BB - - - - - =========== F R A N C E =========== LAGARDERE SCA: Egan-Jones Upgrades Senior Unsecured Ratings to B ---------------------------------------------------------------- Egan-Jones Ratings Company, on August 11, 2020, upgraded the foreign currency and local currency senior unsecured ratings on debt issued by Lagardere SCA to B from B-. Headquartered in Paris, France, Lagardere SCA operates as a media company. VINCI SA: Egan-Jones Lowers Senior Unsecured Ratings to BB ---------------------------------------------------------- Egan-Jones Ratings Company, on August 12, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Vinci SA to BB from BB+. Headquartered in Paris, France, Vinci SA is a global player in concessions and construction with expertise in building, civil, hydraulic, and electrical engineering. ============= G E R M A N Y ============= VERTICAL TOPCO III: S&P Assigns B- Long-Term Issuer Credit Rating ----------------------------------------------------------------- S&P Global Ratings assigned its 'B-' long-term issuer credit rating to Germany-based Vertical Topco III GmbH, the holding company of Thyssenkrupp Elevator Technology (tk elevator). The outlook is positive. S&P said, "At the same time, we assigned our 'B' issue rating to the EUR3.6 billion equivalent first-lien term loan B and EUR3.0 billion equivalent of other senior secured debt, reflecting the recovery rating of '2', and indicating our expectation of average recovery (rounded estimate: 70%) in the event of payment default." Issuance under Vertical Midco GmbH: -- EUR500 million floating rate senior secured notes due 2027; -- $585 million senior secured term loan B due 2027; -- EUR1,100 million senior secured notes due 2027; and -- EUR1,015 million senior secured term loan B due 2027. Issuance under Vertical U.S. Newco Inc: -- $1,560 million senior secured notes due 2027; and -- $2,290 million senior secured term loan B due 2027. S&P said, "We also assign our 'CCC' issue rating to the EUR1.05 billion-equivalent senior unsecured debt maturing in 2028 issued by Vertical Holdco GmbH, reflecting the debt's subordinated ranking and the recovery rating of '6', indicating no recovery in the event of default. "The ratings are in line with the preliminary ratings we assigned on June 24, 2020. The final documentation does not depart materially from what we reviewed in June. Overall conditions have been tightened, making the documentation more credit supportive. The issue amount among the different instruments has been changed slightly, and the achieved interest rate was slightly higher than we expected, albeit remaining in line with our assessment of the current rating. "The carve-out and acquisition of tk elevator has resulted in a highly leveraged capital structure, but we expect deleveraging over the next two years. Thyssenkrupp sold the majority of its elevator business to a private-equity lead consortium (Advent, Cinven, ADIA, RAG, and GIC) for more than EUR17 billion. The consortium is about to raise a total of EUR6.6 billion equivalent in senior secured term loan B and senior secured notes, as well as EUR1.7 billion senior unsecured notes as part of the transaction. We also note the presence in the group structure of EUR2 billion equivalent denominated PIK notes held by third-party investors (which S&P views as debt-like). "After the transaction closes, S&P Global Ratings-adjusted pro forma leverage for 2020 is an estimated 11.7x including the EUR2 billion equivalent denominated PIK notes, and about 9.5x excluding them. This makes tk elevator the most highly leveraged new issuer of the Europe, Middle East, and Africa capital goods that we rate. However, we forecast that the company will reduce leverage to 8.5x-8.9x (about 11x including the PIK notes) in FY2021 and further to about 7.5x (about 10x including the PIK notes) by FY2022." The base-case EBITDA (S&P Global Ratings-adjusted) for 2020 is about EUR950 million; for 2021, more than EUR1 billion; and for 2022, about EUR1.2 billion. The group's fiscal year ends Sept. 30. tk elevator offers a full range of elevator systems for low-to-high rise buildings, escalators, walkways, and related services. S&P said, "Therefore, we believe the company benefits from ongoing urbanization, higher penetration rate in residential buildings, and increasing revenue in its service business from its growing installed base. Over the next two years starting from FY2021, we estimate revenues to increase 3.0%-3.5% per year, and to be only slightly affected by the recession. We expect a gradual increase in profitability over the same period, driven by higher volumes, streamlining of the product portfolio, cost measures, higher retention, and increasing labor efficiency in service operations." However, the recession, especially due to its impact on customer segments such as airports and shopping malls, is likely to lead to higher price sensitivity, and to soften the group's growth and margin improvement over the next two years. S&P estimates the EBITDA margin will improve by more than 200 basis points (bps) to 14% in FY2022, from about 12% in FY2020. The group's reported EBITDA margins are below those of its global peers, at approximately 12% compared with peers' 14%-17%, and its scale is somewhat smaller than other global elevator manufacturers'. The expected catch-up in profitability, to about 14% by FY2022—owing to the reasons described above--is the main factor in forecast deleveraging. S&P expects the group to generate positive free operating cash flow (FOCF), but do not net any cash held in our credit ratio calculations due to financial sponsor ownership of the group. tk elevator will be able to defend its market position. The company is the no. 4 global elevator and escalator producer after Otis, KONE, and Schindler. Otis is the largest manufacturer, with an estimated global market share of about 20% in 2019, with other players at 17%-18%, and tk elevator at about 13%. The elevator market globally is mature and, with the exception of Japan, is dominated by these four players. S&P said, "We expect no material changes in market share over the medium term. Regionally, tk elevator is best positioned in North America, where its position is close to the market leader Otis. With a high service share in the North American market, we view that region as the most important to tk elevator in terms of profit generation. We view positively the group's technological capabilities, underlined by the development of the MAX predictive maintenance solution and the MULTI elevator system." The completion of MULTI is beyond the outlook horizon, but is likely to strengthen the group's market position in high-rise buildings and revenue growth from FY2023 onward. Resilient aftermarket business is supported by an increasing installed base, high renewal rates, and safety regulation. Elevators and escalators are sold with service contracts, which have significantly higher margins than those on equipment. In high-rise building, shopping centers, airports, and other buildings, elevators and escalators are very highly used assets where uptime is crucial. In addition, the assets fall under local safety regulations, requiring regular maintenance and service checks, making the service revenue sticky. Therefore, the service network is an important asset for all global players. Contract renewal rates in the business are high (above 90%), and the service aspect forms an effective barrier to entry to any potential market entrants. S&P said, "We expect that the group will further develop its service operation and efficiency by reducing callback times and churn rates, and raising the contribution from digital sales. We estimate that the group's aftermarket business is accounting for more than 50% of sales and 65% of gross profit, providing earnings and cash flow visibility." S&P said, "We expect low cash flow volatility and a limited impact from COVID-19 on operating performance in FY2020 and FY2021. We understand that so far, the group's service operations have remained resilient, and have been only temporarily affected by COVID-19. The group has seen limited disruption in its supply chain and production, but there are delays on the construction side due to regional shutdowns. We estimate that, over the medium term, some of the group's clients--in particular, airports and shopping malls that are severely hit by the pandemic--are likely to become more price sensitive, and new projects planned before the crisis will be delayed. Nevertheless, we view positively the group's significant scale and scope, general high diversification in terms of geographies and customers, and low capital expenditure (capex) needs, which positively contributes to the group's cash flow stability in the uncertain economic environment." EUR1.9 billion in unfunded facilities for cash and guarantees, no material intra-year working capital swings, and positive free cash flow support the liquidity profile. At the transaction's close, there will be EUR100 million cash held on balance sheet. The liquidity profile is supported by low working capital swings, long dated maturity profile, and EUR1.9 billion revolving credit and guarantee facilities, with sufficient headroom and free operating cash flow thanks to the high share of aftermarket business. S&P believes this provides the group with sufficient financial flexibility given the uncertain economy. S&P said, "The positive outlook reflects our expectation that tk elevator will improve its operating performance over the next 12-18 months after the acquisition's closing, despite COVID-19's impact. We expect revenue to increase by more than 3% a year and EBITDA margin to expand to about 14% by FY2022. With that, we anticipate a gradual deleveraging to 8.5x to 8.9x by FY2021 and about 7.5x by FY2022 (excluding the PIK notes), positive FOCF, and funds from operations (FFO) cash interest coverage ratio of about 2.0x in both years. A prerequisite for a positive rating action would be supportive financial policy to maintain a lower leverage. "We could raise the rating if the group sustainably reduced leverage, namely to about 7.5x (excluding the PIK notes), supported by further EBITDA margin expansion, positive FOCF, and FFO to cash interest coverage of about 2.0x. "We could revise the outlook to stable if the group showed less resilience to the COVID-19-related economic downturn than we expect, or if the group does not increase its revenue or EBITDA margins as expected, resulting in debt to EBITDA (excluding PIK notes) of more than 7.5x or an FFO cash interest ratio of less than 2x by FY2022. This could occur through a higher-than-expected costs base after the carve-out is complete, or increasing pricing pressure during the recession." S&P could also lower the rating or revise the outlook to stable if: -- The group cannot increase profitability and absolute EBITDA as projected; -- It cannot generate sustainable positive FOCF; -- FFO to cash interest coverage falls below 1.5x; -- Liquidity deteriorates; -- Carve-out or restructuring costs are higher than expected; or -- The group undertakes debt-financed acquisitions. ========= I T A L Y ========= CAPITAL MORTGAGE 2007-1: Fitch Affirms Class C Notes Rating at CCsf ------------------------------------------------------------------- Fitch Ratings has affirmed Cordusio RMBS Securitisation S.r.l. - Series 2007's, Cordusio RMBS 3 - UBCasa 1 S.r.l. and Capital Mortgage Series 2007-1. It has also revised the Outlook on the class D notes of Cordusio 3 and Cordusio 4 to Negative from Stable. The rating actions follow a periodic review of the transactions. Capital Mortgage Series 2007-1 - Class A1 IT0004222532; LT A+sf; Affirmed - Class A2 IT0004222540; LT A+sf; Affirmed - Class B IT0004222557; LT B-sf; Affirmed - Class C IT0004222565; LT CCsf; Affirmed Cordusio RMBS 3 - UBCasa 1 S.r.l. - Class A2 IT0004144892; LT AA-sf; Affirmed - Class B IT0004144900; LT AA-sf; Affirmed - Class C IT0004144934; LT A+sf; Affirmed - Class D IT0004144959; LT BBBsf; Affirmed Cordusio RMBS Securitisation S.r.l. - Series 2007 - Class A3 IT0004231244; LT A+sf; Affirmed - Class B IT0004231285; LT A+sf; Affirmed - Class C IT0004231293; LT A+sf; Affirmed - Class D IT0004231301; LT BBB-sf; Affirmed - Class E IT0004231319; LT Bsf; Affirmed TRANSACTION SUMMARY The transactions are securitisations of Italian residential mortgage loans originated and serviced by the UniCredit group (Unicredit, BBB-/Stable/F3). KEY RATING DRIVERS Resilient to COVID-19 Stresses The affirmations and Stable Outlooks on most of the tranches reflect their resilience to larger projected losses, as credit enhancement is sufficient to mitigate the risks associated with the COVID-19 crisis. Fitch has applied additional stresses, in conjunction with its European RMBS Rating Criteria, in response to the developments related to the coronavirus pandemic, in accordance with its Global Structured Finance Rating Criteria. Fitch will apply this COVID-19 stress to its existing and new rating analysis, including to the resolution of Rating Watch Negative on any notes until further notice. To capture the possible build-up of arrears in the following months due to the COVID-19 crisis, Fitch has tested arrear sensitivity by increasing the default rate 10%. Despite its expectation of deterioration in asset performance, this is partly mitigated by the transactions' high portfolio seasoning (around 13 years). Fitch has also performed sensitivity to payment holidays, which represent around 15%-20% (official statistics reported by Bank of Italy) of Italian mortgages, among the highest across European countries. Interest Deferability and Negative Outlooks The Negative Outlook on the class D notes of Cordusio 3 and Cordusio 4 reflects increasing rating sensitivity to the timing of interest inflows when these notes become the most senior and would need to clear unpaid interest accrued up to then. The increasing share of arrears (up 2% since the 2019 review) in the portfolios (mainly in the first one-to-two-month arrears buckets) also explains the Outlook revisions. Performance Remains Stable As of May 2020 (June 2020 for Capital Mortgage), three-month plus delinquencies were at 0.74% (Capital Mortgage), 1.6% (Cordusio 3) and 1.2% (Cordusio 4), broadly in line with the Italian RMBS average (around 1%). Gross cumulative defaults stood at 14%, 6.2% and 5.5% of the respective original portfolio balances. Cordusio 3 and Cordusio 4 have shown similar performance trends so far. For Cordusio 3 CGD is not far from the junior notes trigger (6.5%), which if breached will result in the excess spread being trapped into the principal available funds, thus accelerating an increase in credit enhancement. Capital Mortgage's asset performance has improved over the last year due to a slower pace of new defaults and increasing recoveries. As a consequence, cumulative net defaults, as a ratio of the initial portfolio balance, were 9.4% in July 2020, down from the peak of 11% in October 2016. Reported CGD is 14%, marginally higher than levels in September 2019 and not far from the 15% interest deferral trigger that would make interest payment on the class B notes rank junior to the aggregate principal deficiency ledger balance. Increasing CE CE continues to build on the notes as the result of sequential amortisation and the non-amortising reserves for Cordusio 3 and 4. For Capital Mortgage, CE has built up as a result of the notes' sequential amortization. The class C PDL balance still accounts for 7.8% (down from 40.9%) of the class C notes, which is reflected in the distressed rating of 'CCsf' for this tranche Payment Interruption Risk Fitch's analysis considers whether a transaction can maintain timely payments to noteholders following a disruption to the collections process. Capital Mortgage's cash reserve is completely depleted since 2010. Cordusio 4 is still exposed to payment interruption risk, despite its cash reserve being at target because the reserve fund can also be used to provision for defaults and so may not be available for interest payment. Fitch expects further drawings on the cash reserve due to credit losses; in this scenario, the remaining reserve fund balance could be insufficient to meet timely interest payments for the rated notes. In line with Fitch's Counterparty Risk Criteria, the two transactions' notes cannot achieve ratings more than five notches higher than the servicer's rating and, in any case, no higher than the 'Asf' category. Hence, Fitch constrains the ratings of Capital Mortgage's class A1 and A2 notes and of Cordusio 4's class A3 and B notes at 'A+sf'. Sovereign Cap Italian securitisations can achieve a maximum rating of 'AA-sf', six notches above Italy's Long-Term Issuer Default Rating (BBB-/Stable). This is the case for the class A2 and B notes of Cordusio 3. The Stable Outlook on these tranches' mirrors that on the sovereign. ESG Influence Capital Mortgage has an ESG Relevance Score of 5 for Transaction Parties & Operational Risk due to payment interruption risk, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in a cap to the senior notes' rating. Cordusio 4 has an ESG Relevance Score of 5 for Transaction Parties & Operational Risk due to payment interruption risk, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in a cap to the senior notes' rating. RATING SENSITIVITIES Developments that may, individually or collectively, lead to positive rating action include: - Increases in CE as the transactions deleverage to fully compensate credit losses and cash flow stresses that are commensurate with higher ratings, all else being equal. - The ratings of Capital Mortgage's class A1 and A2 and Cordusio 4's class A3 and B notes are exposed to unmitigated payment interruption risk. Rating caps could be lifted in the presence of further portfolio amortisation and stable performance, leading to reserve fund replenishment for Capital Mortgage, and reserve fund remaining at its target for Cordusio 4. - The ratings of Capital Mortgage's class B and C notes are reliant on recoveries from the still large stock of outstanding defaults. To date recoveries have been volatile. Larger and faster recoveries than expected could trigger positive rating actions. - The ratings of Cordusio 3's class A2 and B are sensitive to changes in Italy's Long-Term IDR. Changes to Italy's IDR and the rating cap for Italian structured finance transactions, currently 'AA- sf', could trigger rating changes to the notes rated at this level. Developments that may, individually or collectively, lead to negative rating action include: - For- Cordusio 3 senior notes, weakening liquidity due to large take-ups on mortgage payment moratoriums and new defaults as a consequence of the coronavirus crisis. - The ratings of the class B and C notes are reliant on recoveries from the still large stock of outstanding defaults and recoveries are volatile. Recovery cash flows consistently lower and slower than Fitch's assumptions may put pressure on the ratings of these tranches. - Changes to Italy's IDR and the rating cap for Italian structured finance transactions, currently 'AA- sf', could trigger rating changes to Cordusio 3's class A2 and B notes. - A longer-than-expected coronavirus crisis that weakens macroeconomic fundamentals and the mortgage market in Italy beyond Fitch's current base case. CE cannot fully compensate the credit losses and cash flow stresses associated with the current ratings, all else being equal. As outlined in "Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases", it considers a more severe downside coronavirus scenario for sensitivity purposes whereby a more severe and prolonged period of stress is assumed with a halting recovery from 2Q21. Under this scenario, Fitch's analysis uses a 15% weighted average foreclosure frequency increase and a 15% decrease in the weighted average recovery rate above the additional stresses applied in conjunction with its European RMBS Rating Criteria in response to the coronavirus outbreak. This scenario could lead to downgrades of one to three notches across all tranches, with greatest impact on Cordusio 3's class C and D notes. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transactions. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Capital Mortgage class A1 and A2 and Cordusio 4 class A3 and B notes' ratings are capped at 'A+sf'/Stable. Cordusio 3 class A2 and B notes' ratings are linked to changes in Italy's Long-Term IDR. ESG CONSIDERATIONS Capital Mortgage and Cordusio 4 each has an ESG Relevance Score of '5' for Transaction Parties & Operational Risk. Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. DEDALUS HOLDING: S&P Affirms B ICR on DXC Acquisition ----------------------------------------------------- S&P Global Ratings affirmed its 'B' long-term issuer credit and issue ratings on Dedalus Holding S.p.A (Dedalus) and its debt. The acquisition of DXC Technology's health care software solutions marginally lowers Dedalus' leverage. The acquisition will be funded by a EUR240 million incremental term loan and EUR250 million of equity. Dedalus will also upsize its revolving credit facility (RCF) by EUR30 million to EUR110 million. S&P said, "We forecast that the transaction will slightly lower Dedalus' S&P Global Ratings-adjusted pro-forma leverage to 7.6x in 2020, compared with our previous expectation of 7.9x, because of partial equity funding and a favorable purchasing multiple. Overall, this does not materially change our view of the company's highly leveraged financial risk profile, which remains constrained by relatively high leverage." S&P said, "The acquisition is supportive for Dedalus' business risk profile because of increased scale, geographical diversification, and higher recurring revenue, but is not transformative, in our view. The transaction will increase Dedalus' scale by more than 40% and we estimate pro-forma revenue of about EUR700 million in 2020. It will also expand Dedalus' operations in northern and southern Europe, the U.K., Ireland, Australia, and New Zealand, making it a pan-European leader in health care IT. Furthermore, we think it will help accelerate Dedalus' migration toward managed and cloud services by taking advantage of the success of DXC Technology's health care software solutions in this domain, and therefore increase recurring revenue and cross-selling opportunities. We estimate that the combined group's recurring revenue as a percentage of total revenue will be about 55% in 2020, compared with about 50% for Dedalus on a stand-alone basis. We therefore see Dedalus' business risk profile as somewhat stronger, but still within the fair category. That said, even after incorporating this transaction, Dedalus will remain focused on health care IT and not materially change its positioning in existing markets. In addition, Dedalus will remain smaller in scale compared with larger and more diversified peers across the global software industry, and its lower share of recurring revenue and profitability continue to constrain material upside to its business risk profile. "We anticipate limited execution and integration risks associated with the acquisition. In our view, the transaction will very likely go through antitrust clearance because of limited geographical overlap and a fragmented competitive landscape. We also expect limited integration risks because of the company's strategy to maintain the key management team at the acquired business. Operations in each country will be overseen by a local management team and Dedalus' CEO held a leadership role at DXC Technology's health care software solutions for more than 10 years prior to taking his current position this year. Moreover, we think Dedalus' sound acquisition track record and up-to-two-year transitional service agreement with DXC should support a smooth integration. "The stable outlook reflects our view that Dedalus' pro-forma revenue will continue to increase by 5%-7% in 2020-2021, despite a potential hit to professional services revenue from COVID-19, with steadily increasing EBITDA on the back of expected synergies leading to S&P Global Ratings-adjusted debt to EBITDA of below 8x this year. "We could lower the rating by one notch if Dedalus' growth is much slower than our current base case, or the integration with Aceso and DXC Technology's health care software solutions leads to a much higher churn rate, resulting in adjusted debt to EBITDA above 8.5x (7.5x excluding payment in kind [PIK]), or free operating cash flow (FOCF) to debt below 5% in 2020. "We think an upgrade is unlikely over the next 12 months considering Dedalus' highly leveraged capital structure and private-equity ownership. However, we could raise the rating by one notch over the longer term if Dedalus significantly deleverages to below 6.5x (5.5x excluding PIK), and FOCF to debt increases to about 10% on a sustained basis." ENI SPA: Egan-Jones Lowers FC Senior Unsecured Rating to BB+ ------------------------------------------------------------ Egan-Jones Ratings Company, on August 12, 2020, downgraded the foreign currency senior unsecured rating on debt issued by Eni SpA to BB+ from BBB+. Headquartered in Rome, Italy, Eni SpA explores for and produces hydrocarbons in Italy, Africa, the North Sea, the Gulf of Mexico, Kazakhstan, and Australia. PIAGGIO AEROSPACE: Enters Into Financing Agreement -------------------------------------------------- Kerry Lynch at AINonline reports that Piaggio Aerospace, which entered extraordinary receivership in late 2018, has lined up EUR30 million (US$35.79 million) in new financing, clearing the way for the Italian manufacturer of the Avanti Evo pusher turboprop to fully resume operations and continue the effort to find a buyer. The financing agreement with Banca lfis follows approval from the Italian Ministry of Economic Development and the approval of the Supervisory Committee, AINonline notes. "The agreement, reached at the end of a process that has initially involved other public and private financial institutions, will now allow Piaggio Aero Industries and Piaggio Aviation--the two companies in extraordinary administration that operate under the Piaggio Aerospace brand--to be fully operational," Vincenzo Nicastro, the extraordinary commissioner for Piaggio, as cited by AINonline, said "thus gradually recalling the workers still in temporary layoffs. The sales process can also be now completed." The transaction is the second that Banca lfis has conducted with Piaggio, with the first involving a line of credit granted in 2019, AINonline states. According to AINonline, Mr. Nicastro is hoping to find a new owner for Piaggio by the end of the year. Piaggio in late February formally issued a call for expressions of interest and received 19 responses, 11 of which have been undergoing further review, AINonline relates. =================== K A Z A K H S T A N =================== SAMRUK-KAZYNA CONSTRUCTION: Fitch Cuts IDRs to BB, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has downgraded Kazakhstan's Samruk-Kazyna Construction Long-Term Foreign and Local Currency Issuer Default Ratings to 'BB' from 'BB+'. The Outlooks are Stable. The rating action is due to a reassessment of the government's support to SKCN on an expected change in the latter's funding structure. SKCN is a government-related entity that provides essential public services such as affordable housing, support of private developers, and overall development of the construction sector. KEY RATING DRIVERS Status, Ownership and Control Assessed as 'Strong' SKCN is authorised by the government to implement its state housing policy, but its operations are run under a general legal system. It is a joint-stock company indirectly owned by the government via the fully state-owned National Wealth Fund Samruk-Kazyna (BBB/Stable/F2). Operating and financing activities are controlled by the government and SKCN coordinates its operations with National Wealth Fund Samruk-Kazyna, Ministry on Investment and Development and the National Bank of Kazakhstan. Fitch does not expect any changes to SKCN's legal status, control and ownership over the medium term. Support Track Record reassessed to 'Strong' from 'Very Strong' The reassessment is driven by an expected change in SKCN's funding structure. Fitch expects state funding provided via subsidised loans to cease, once SKCN completes the government programme on construction of residential estate, "Nurly Zher". Although the company will continue with construction of residential and commercial estates in Kazakhstan, those projects are not expected to be part of government programmes. To finance such projects Fitch expects SKCN to attract funding by issuing corporate bonds in debt capital market. Its increasing involvement in commercial activities affects its assessment of Support Track Record and Expectation as SKCN will no longer rely solely on state funding. Socio-Political Implications of Default Assessed as 'Strong' Fitch views SKCN as strategically important to the state due to its key role in providing affordable housing. According to Fitch's estimates, it provides a large volume of rental housing in the country and its role is difficult to substitute in the short-term. Under Kazakhstan's "Nurly Zher", SKCN remains a government-appointed agent in the development of rental and affordable housing in the republic, and is currently fully funded by the state. This means financial distress of SKCN would jeopardise the implementation of the state's housing programme, leading to serious socio-political implications, in Fitch's view. Financial Implications of Default Assessed as 'Moderate' SKCN has a separate budget and its debt is not consolidated in the general government's accounts. As it is not a large and regular participant in debt capital markets a default would have only modest impact on the availability and cost of finance for the government and other GREs. In Fitch's view the share of market debt exposure should remain low over the medium term. Revenue-Defensibility Assessed at 'Midrange' Since demand for residential real estate in Kazakhstan is much higher than supply due to such factors as migration, growing population and urbanisation, Fitch assesses demand as 'Midrange'. It is Fitch's view that SKCN has limited flexibility in increasing prices of their affordable housing activities, which are controlled by the shareholder and the government. Rental rates and housing prices are outside the control of SKCN, making the entity a price-taker. Operating Risk Assessed as 'Weaker' Fitch assesses operating risks as 'Weaker' due to cost volatility in an evolving Kazakh housing market. Fitch expects staff costs to remain close to 20% of operating expenditure from 2020 onwards, once the sale of residential and commercial properties under the state's construction programme are completed, unless the government assigns new projects. Financial Profile assessed as 'Weaker' SKCN is highly leveraged with net debt-to-EBITDA in 2019 of 17.5x. Fitch's rating case expects the ratio to improve to about 17.0x by 2024. Under its current debt policy, the company fully relies on long-term state funding, which is sourced from the National Fund of the Republic of Kazakhstan and channeled through National Wealth Fund Samruk-Kazyna. Funding in turn is invested in private developers for the construction of affordable housing and rental properties. However, after its planned bond issue (KZT16.5 billion), SCKN's funding will not be solely reliant on state funding. SKCN has been profitable for the last eight years. It recorded a net profit of KZT4.1 billion in 2016, up from KZT1.5 billion in 2012, after it was designated as operator of "Nurly Zher". The improved performance was driven by increased turnover on the back of low-cost state funding. Net income since increased to KZT6.8 billion in 2019. At end-2019 turnover increased 35% to KZT21.9 billion, primarily due to an increase in sales of completed residential and commercial properties. From 2020, revenue will start to decline due to cessation of proceeds from property sales following the expected completion of the "Nurly Zher" programme. DERIVATION SUMMARY Fitch rates SKCN using a top-down approach under its GRE Criteria, reflecting its strong links with the state, its ultimate, albeit indirect, 100% state ownership and its important public mission in providing affordable housing. This results in a GRE score of 25. Combined with SKCN's 'b' Standalone Credit Profile, which is assessed based on its Public Sector Entities-Revenue Supported Criteria, this leads to SKCN's 'BB' IDR being three notches lower than the sovereign's 'BBB' IDR. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: Positive rating action on the sovereign's IDRs would lead to a similar action on SKCN's ratings, provided that the company's links to the government are unchanged. Tighter integration with the sovereign could also be positive for the company. Factors that could, individually or collectively, lead to negative rating action/downgrade: Changes to SKCN's status or increasing involvement in commercial activity, leading to a weakening of the links with the sovereign could cause its assessment to switch to a bottom-up approach, resulting in a downgrade. Negative rating action on the Republic of Kazakhstan would also be reflected in SKCN's ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE According to 2019 results total debt declined to KZT114.1 billion, from 2018's KZT141.4 billion. SKCN's debt is entirely in fixed interest rates. It actively monitors its exposures to collateral calls on a monthly basis. It regularly sends reports on the development of funds and on the structure of borrowings and repayment schedule to the National Wealth Fund Samruk-Kazyna. As of today, SKCN has no foreign-currency borrowing; all its debt is in local currency. Entire funding was provided by such government authorities as National Wealth Fund Samruk-Kazyna and the National Bank of Kazakhstan. However, to finance new project, SKCN plans to issue a KZT16.5 billion bond on Moscow Stock Exchange, which will be financed in Russian roubles, exposing the entity to FX risk. The bond is targeted to be subscribed in August 2020. Following the bond issue, the proportion of foreign-currency debt will reach 16% of total debt. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). ===================== N E T H E R L A N D S ===================== AIRBUS SE: Egan-Jones Lowers Senior Unsecured Ratings to BB+ ------------------------------------------------------------ Egan-Jones Ratings Company, on August 10, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Airbus SE to BB+ from BBB-. Headquartered in Leiden, Netherlands, Airbus SE manufactures airplanes and military equipment. =========== N O R W A Y =========== NORSK HYDRO: Egan-Jones Lowers Senior Unsecured Ratings to B+ ------------------------------------------------------------- Egan-Jones Ratings Company, on August 11, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Norsk Hydro ASA to B+ from BB-. Headquartered in Oslo, Norway, Norsk Hydro ASA is a supplier of aluminum and aluminum products. NORWEGIAN: Swedish Division Denied Credit Guarantee --------------------------------------------------- David Kaminski-Morrow at FlightGlobal reports that Scandinavian budget carrier Norwegian's Swedish division has been denied a credit guarantee by the Swedish national debt office. The office states that it has "decided to reject" the application because guarantees can only be granted to airlines considered financially viable on December 31, 2019, FlightGlobal relates. According to FlightGlobal, it says there was a "very high risk" at the time--even before the air transport downturn--that Norwegian would not be able to meet its financial obligations, and that it would not be able to manage further debt. "Accordingly, Norwegian's application has been denied," FlightGlobal quotes the office as saying, adding that there is no opportunity to appeal. Loss-making Norwegian has undergone an extensive debt-to-equity conversion program as part of a broad restructuring, in order to obtain state funding from Norway's government, FlightGlobal notes. The airline is due to disclose its first-half financial results on Aug. 28, which will outline the full impact of the second quarter disruptions arising from the coronavirus crisis, FlightGlobal discloses. This follows a first quarter during which Norwegian's operating loss deepened by more than 40% to more than NOK2 billion (US$226 million) and its interest-bearing debt rose to nearly NOK67 billion, FlightGlobal states. ============= R O M A N I A ============= KAZMUNAYGAS INTERNATIONAL: S&P Affirms B ICR, Alters Outlook to Neg ------------------------------------------------------------------- S&P Global Ratings affirmed its 'B' long-term issuer credit rating on Bucharest-based KazMunayGas International N.V. (KMGI) and revised the outlook to negative from stable. S&P anticipate EBITDA will suffer in 2020 before improving in 2021. S&P said, "In 2020, we think KMGI's EBITDA will decrease to $50 million-$100 million, down from about $200 million posted in 2019. This is mainly due to the compression of profits in the refining division as a result of the impact of COVID-19, including lockdown in Romania that is driving down volume and margins in KMGI's key markets. The drop in crude and oil product quotations that occurred in the first half of 2020 also led to inventory holding losses. KMGI's refineries were stopped for a couple of months for a planned turnaround (which occurs every four years) and have reopened only at about 70% of their capacity. Having said that, we believe KMGI's business diversification should to some extent help limit the impact of the current trough. In particular, we think the retail and trading divisions will show some resilience to the current downturn, as these divisions will be less prone to operational disruptions and dwindling demand levels. "We anticipate a rebound in 2021, as we believe KMGI's volumes and profits should improve close to pre-pandemic levels, along with the performance of the retail division, which was growing nicely with the network expansion and higher share of non-fuel. This is supported by July EBITDA of $17 million, a level commensurate with pre-COVID performance. "We expect significant working capital outflows and increase in gross debt in 2020 although it will partly reverse in 2021. We now anticipate about negative $400 million working capital outflows in 2020. We estimate about half of these will be related to the trading business whereby the company prefers to draw on its trading facilities to benefit from relatively low interest rates, as opposed to incurring charges to modify the commercial conditions/terms related to their trading business. We forecast about $200 million working capital outflows for the other parts of KMGI activities due to time difference between customer payment and KMGI purchases, and we expect this part to reverse fully in 2020 as the company pays its customers. All in all this is resulting in a significant increase in gross debt (to about $700 million by year-end 2020 in our calculations compared to about $300 million at year-end 2019), which we did not previously anticipate. "KMGI's liquidity has vulnerabilities. Our rating captures the fact that KMGI's liquidity is sensitive to the timely rollover of a number of short-term bank facilities on an ongoing basis, which the company extensively uses at its trading division. We also think a breach of the interest coverage covenant is possible in 2020, but we expect the banks, which have supported KMGI at more difficult times, to provide a waiver. Given the existence of a cross-default covenant between KMGI and its parent, KazMunayGas NC JSC (KMG), we believe the latter will have to step in if KMGI faces any challenges with renewing the credit lines or obtaining a waiver. "We expect KMGI to delay some of its investments by one year or more but will pursue long-term growth strategy. We think KMGI will use its discretion to postpone growth capital expenditures (capex) and adapt maintenance capex to the current macroeconomic state if need be; we believe it could postpone about $100 million in 2020-2021 if necessary. We assume the sector conditions will improve in the next year and that the company will stick to its long-term objective to grow its retail business, modernize its operations, and drive efficiency, but the timing for this remains uncertain. The company's long-term growth strategy will, however, weigh on KMGI's ability to generate cash and deleverage. Moreover, KMGI needs to purchase the 26.7% stake held by the Romanian State in Rompetrol Rafinare, for $200 million, although we do not expect this to happen in the short-term and therefore exclude this from our base case." Resolution of Romania's investigation into the company is still pending, but the associated risks have reduced. Criminal charges against KMGI filed by the Romanian State's directorate for Investigating Crime and Terrorism (DIICOT) were recently dropped, which remove most of the financial risk related to this investigation. Still, about $100 million worth assets remain at risk and the pending case could take a few years to resolve. S&P's base case does not incorporate any amounts relating to this investigation due to the lack of visibility. The negative outlook reflects the uncertainty around the pace and materiality of improvement on profit generations in the coming quarters. In the context of the ongoing COVID-19 pandemic, there could be more operational disruptions and pressure on KMGI's sectors. S&P projects adjusted debt/EBITDA to be back to around 4x in 2021, assuming no second COVID-19 wave in KMGI's key markets, including Romania. S&P also assumes renewal of short-term facilities and timely receipt of waivers, with or without support from KMG. S&P said, "We could take a negative rating action if KMGI fails to improve cash flow generation in 2021 supporting leverage going down rapidly towards 4x. We could also downgrade the company because of a lack of support from the parent, which is not our base case. "We could revise the outlook to stable in the next 12 months if KMGI rebuilds its profit and cash flow generation levels and improves its liquidity position. This could happen if the impact from the coronavirus pandemic in KMGI's key countries of operations diminishes as we move into 2021." ========= S P A I N ========= ABENGOA SA: Begins Preliminary Insolvency Proceedings ----------------------------------------------------- Nathan Allen at Reuters reports that troubled Spanish renewables firm Abengoa has begun preliminary insolvency proceedings for part of its business in an ongoing restructuring process, the company said in a regulatory filing on Aug. 18. Abengoa said the measure would give it more time to finalize negotiations with creditors and protect the interests of its shareholders, Reuters relates. The proceedings relate to Abengoa SA, an entity that was already earmarked to be dissolved as part of the restructuring, Reuters notes. Already struggling with a heavy debt load, Abengoa was hit hard by the coronavirus pandemic, which put a stop to several projects and disrupted its supply chain, weighing on revenues, Reuters discloses. Following prolonged negotiations, the company secured a complex deal with its creditors in early August, Reuters relays. Under that agreement, most of the group's assets will be transferred to a holding named AbenewCo 1, which will receive state-guaranteed financing of up to EUR230 million (US$274.62 million), Reuters states. In 2016, Abengoa avoided becoming Spain's largest-ever corporate bankruptcy after striking a deal to refinance EUR9 billion of debt, which handed creditors control of the company, Reuters recounts. RURAL HIPOTECARIO VIII: Fitch Affirms Class E Notes at CCsf ----------------------------------------------------------- Fitch Ratings has taken multiple rating actions on five Rural Hipotecario RMBS in Spain, including the downgrade of two tranches and the removal from Rating Watch Negative of 11 tranches. Rural Hipotecario VIII, FTA - Class A2a ES0366367011; LT AAsf; Affirmed - Class A2b ES0366367029 LT AAsf; Affirmed - Class B ES0366367037; LT Asf; Affirmed - Class C ES0366367045; LT A-sf; Affirmed - Class D ES0366367052; LT BBBsf; Downgrade - Class E ES0366367060; LT CCsf; Affirmed Rural Hipotecario Global I, FTA - Class A ES0374273003; LT AA+sf; Affirmed - Class B ES0374273011; LT A+sf; Affirmed - Class C ES0374273029; LT Asf; Affirmed - Class D ES0374273037; LT BBB+sf; Affirmed - Class E ES0374273045; LT CCCsf; Affirmed Rural Hipotecario VII, FTA - Class A1 ES0366366005; LT AAAsf; Affirmed - Class B ES0366366021; LT AA-sf; Affirmed - Class C ES0366366039; LT Asf; Affirmed Rural Hipotecario IX, FTA - Class A2 ES0374274019; LT A+sf; Affirmed - Class A3 ES0374274027; LT A+sf; Affirmed - Class B ES0374274035; LT A+sf; Affirmed - Class C ES0374274043; LT BBB+sf; Affirmed - Class D ES0374274050; LT BB-sf; Downgrade - Class E (RF) ES0374274068; LT CCsf; Affirmed Rural Hipotecario X, FTA - Class A ES0374275008 LT A+sf; Affirmed - Class B ES0374275016; LT Asf; Affirmed TRANSACTION SUMMARY The transactions comprise fully amortising residential mortgages originated and serviced by multiple rural savings banks in Spain with a back-up servicer arrangement with Banco Cooperativo Espanol S.A. (BBB/Negative/F2). KEY RATING DRIVERS COVID-19 Additional Stresses In its analysis of the transactions, Fitch has applied additional stresses, in conjunction with its European RMBS Rating Criteria, in response to the coronavirus outbreak and the recent legislative developments in Catalonia. Fitch anticipates a generalised weakening of the Spanish borrowers' ability to keep up with mortgage payments following a spike in unemployment and increased vulnerability of self-employed borrowers. Performance indicators such as the levels of arrears (currently ranging between 0.5% and 1.4% for the five transactions) could increase in the following months, leading Fitch to also incorporate a 10% increase to the weighted average foreclosure frequency of the relevant portfolios. As outlined in "Fitch Ratings Coronavirus Scenarios: Baseline and Downside Cases", also considers a downside coronavirus scenario for sensitivity purposes whereby a more severe and prolonged period of stress is assumed. Under this scenario, Fitch's analysis accommodates a further 15% increase to the portfolio's WAFF and a 15% decrease to the WA recovery rate. Off RWN; Negative Outlooks The affirmation and RWN resolution of nine tranches reflects its view that credit enhancement is sufficient to mitigate the risks associated with its base case coronavirus scenario. The Negative Outlook on these tranches reflects the ratings' vulnerability over the longer term, driven by a larger-than-average exposure to self-employed borrowers (ranging between 21.9% and 28.9% of portfolio balances). This group of borrowers are particularly vulnerable to the crisis, due to income volatility, and may default on their mortgages. The downgrade and RWN resolution of two tranches (Rural 8 and Rural 9 class D notes) reflect the insufficient CE protection to compensate for the larger projected losses under its base case coronavirus scenario. The Negative Outlook on these tranches reflects the ratings' vulnerability over the longer term to coronavirus stress. Low Take-up Rates on Payment Holidays Fitch does not expect the COVID-19 emergency support measures introduced by the Spanish government for vulnerable borrowers to negatively impact the SPV's liquidity, given the low Spanish national average take-up rate of payment holidays of around 9%. Additionally, the high portfolio seasoning of around 14 to 17 years and the large share of floating-rate loans enjoying currently low interest rates are strong mitigating factors against macroeconomic uncertainty. Rural 9 Capped on Payment Interruption Risk Rural 9 remains exposed to payment interruption risk in the event of servicer disruption as the available structural mitigating features (ie cash reserve funds that can be depleted by losses) are deemed insufficient to cover stressed senior fees, net swap payments and senior notes interest due while an alternative servicer is being sought. As a result, Fitch continues to cap the maximum achievable rating of this transaction at 'A+sf' as per its Structured Finance and Covered Bonds Counterparty Rating Criteria. Rural 7 & 10 Capped on Counterparty Risks Rural 10's maximum achievable rating remains capped at 'A+sf' due to the account bank minimum eligibility rating thresholds of 'BBB+' and 'F2', which are not compatible with 'AAsf' or 'AAAsf' rating categories as per Fitch's Counterparty Criteria. Rural 7's class C and Rural 10's class B ratings are capped at the SPV account bank provider deposit rating (Societe Generale S.A.) as the transactions' cash reserves held at this entity represent the only source of structural CE for these notes. The rating cap reflects the excessive counterparty dependence on the SPV account bank holding the cash reserves, in accordance with Fitch's Structure Finance and Covered Bonds Counterparty Rating Criteria. ESG Considerations - Governance Rural 7 and Rural 10 each has an Environmental, Social and Governance Relevance Score of '5' for Transaction Parties & Operational Risk due to excessive counterparty risk, which has a negative impact on the credit profile, and is highly relevant to the ratings, resulting in a downward adjustment to the ratings by at least one notch. Rural 9 has an Environmental, Social and Governance Relevance Score of '5' for Transaction & Collateral Structure due to payment interruption risk, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in a downward adjustment to the rating by at least one notch. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: Increases in CE as the transactions deleverage to fully compensate the credit losses and cash flow stresses that are commensurate with higher rating scenarios, all else being equal. For the senior class notes of Rural 9, improved liquidity protection against a servicer disruption event. This because the ratings are capped at 'A+sf' due to unmitigated payment interruption risk. Factors that could, individually or collectively, lead to negative rating action/downgrade: A longer-than-expected coronavirus crisis that weakens macroeconomic fundamentals and the mortgage market in Spain beyond Fitch's current base case. CE cannot fully compensate the credit losses and cash flow stresses associated with the current ratings, all else being equal. To approximate this scenario, a rating sensitivity has been conducted by increasing default rates by 15% and cutting recovery expectations by 15%, which would imply downgrades of one category for some of the notes. A worse-than-expected performance from self-employed borrowers if the coronavirus pandemic shock materialises in further job losses and more income volatility. For Rural 7 class C and Rural 10 class B notes, a downgrade on Societe Generale, S.A.'s deposit rating, due to the notes' ratings being capped to the bank rating for unmitigated counterparty risk. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. Fitch has not reviewed the results of any third- party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring. Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Rural 7 class C notes' and Rural 10 class B notes' 'Asf' ratings are capped at Societe Generale S.A.'s Long Term Deposit Rating of 'A'. ESG CONSIDERATIONS Rural Hipotecario IX, FTA: Transaction & Collateral Structure: 5 Rural Hipotecario VII, FTA: Transaction Parties & Operational Risk: 5 Rural Hipotecario X, FTA: Transaction Parties & Operational Risk: 5 Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =========================== U N I T E D K I N G D O M =========================== AMIGO LOANS: Moody's Cuts CFR to B3, Alters Outlook to Neg. ----------------------------------------------------------- Moody's Investors Service has downgraded to B3 from B2 the corporate family rating of Amigo Loans Group Ltd and the backed senior secured notes issued by Amigo Luxembourg S.A. This rating action concludes the review for downgrade on the ratings initiated on February 11, 2020 and extended on May 28, 2020. The outlook on the issuers was stable prior to placing the ratings under review. The outlook on all issuers has been changed to negative from ratings under review. RATINGS RATIONALE DOWNGRADE OF CFR AND DEBT RATING The downgrade follows a much-weakened financial profile due to Amigo's challenged operations owing to the Financial Ombudsman Service's decision in favour of customers, resulting in sizeable provisioning requirements, and Amigo entering into an amended Voluntary Requirement with the Financial Conduct Authority, which have not concluded yet. These add on to challenges Amigo was facing due to i) its disputes with its then majority shareholder that resulted in a strategic review and management change, and ii) coronavirus induced economic slowdown. These events resulted in Amigo to largely discontinue new lending at this time and in a weakening of its performance, leading to the temporary suspension of unutilized committed securitization lines. The rating agency regards the rise in claims filed by the claim's management companies, the FCA investigation and coronavirus outbreak as social risks under its Environmental Social and Governance framework, given the substantial interactions with their retail customers and implications for public life. Moody's has captured the heightened level of uncertainty in relation to Amgio's future value proposal by introducing a one negative qualitative adjustment notch for franchise value in the company's overall credit assessment, which is in addition to the current one negative qualitative adjustment notch for corporate behaviour and risk management incorporated in the company's overall credit assessment. The conclusion of the review follows increased clarity on Amigo's future ownership with the ongoing sale of the majority shareholder's stake in the open market resulting in its decline to less than twenty percent of the overall voting rights attached to shares, as well as Amigo appointing some new senior management and board members, which should eventually bring a greater clarity to its strategic direction as well as financial performance. Amigo's B3 CFR reflects the company elevated risk management challenges and contracting loan book and thus revenue generation, resulting in weak profitability. Despite upfronted provisioning cost, Moody's expects Amigo to report profits by mid-year 2020, but to turn loss-making towards the end of the year, unless material new lending is resumed. Moody's expects revenues to decline and to be outpaced by rising operational, credit and additional complaints costs. The amortisation of the loan book will not be fully offset by any initial modest new lending the agency expects to be resumed later in the year. The gradual amortisation of the loan book should paydown some of the company's securitisation funding and contribute to cash reserves, which could support new lending or could be used to buy back some of the existing senior notes as stated in the annual report. Furthermore, the B3 CFR reflects Amgio's weak asset quality and Moody's expectation of its further deterioration due to weakening macroeconomic environment as well as contracting outstanding gross loans. Moody's views liquidity risk as elevated despite no refinancing needs until 2022 of its revolving securitisation facility, though access to the remaining facility has been temporarily suspended; and refinancing of Amigo's senior secured notes by 2024. Amigo's solid Tangible Common Equity relative to Tangible Managed Assets at 28% as of March 2020 that continues to increase due to deleveraging, provides good loss absorbing cushion against uncertainties ahead from potential additional sizeable cost it might incur and declining earnings stream. - RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook reflects uncertainties regarding the additional claim costs and potential regulatory fines Amigo may incur whose impact is amplified due to lack of clarity around when it will resume new lending to improve its weak profitability over the next 12-18 months. Its solid capitalisation will underpin its resilience against weakening profitability and asset risk; however, in the absence of a turnaround in bottom line, Amigo's viability is challenged especially due to its current lack of access to funding markets, despite the ongoing deleveraging resulting in reduced refinancing needs. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Given the negative outlook currently there is no upward pressure on Amigo's CFR nor backed senior secured debt rating. The outlook could be turned to stable i) if volume of complaints declines significantly and FCA discussions conclude without adversely impacting the franchise positioning and cash reserves; ii) Moody's views that the company will be able to gradually successfully resume new credit lending and improve its profitability to a more sustainable level, as well as iii) if Amigo achieves a more diversified funding profile. The firm's CFR could be downgraded because of further weakening in its solvency or liquidity profile, and/or franchise positioning, governance and risk management. The senior notes could be downgraded if the CFR is downgraded and the group were to issue a material amount of secured recourse debt or there was a material increase in the super senior funding lines that would increase expected loss for noteholders. Purchase of senior notes at a material discount could be viewed as distressed exchange and result in multi notch downgrade. LIST OF AFFECTED RATINGS Issuer: Amigo Loans Group Ltd Downgraded: Long-term Corporate Family Rating, downgraded to B3 from B2 Outlook Action: Outlook changed to Negative from Ratings under Review Issuer: Amigo Luxembourg S.A. Downgraded: Backed Senior Secured Regular Bond/Debenture, downgraded to B3 from B2 Outlook Action: Outlook changed to Negative from Ratings under Review PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Finance Companies Methodology published in November 2019. NMC HEALTH: Administrators Uncover Most of Hidden Debt ------------------------------------------------------ Nicolas Parasie at Bloomberg News reports that NMC Health Plc's administrators said that they've uncovered most of the hidden debt that caused the Middle East hospital operator to collapse. According to Bloomberg, the caretakers of the business are now looking into a range of options to recover some of those funds, Marija Simovic, managing director at Alvarez & Marsal, the restructuring specialist appointed as joint administrators in April, said in an interview on Aug. 19. "Do we believe a majority of it has been identified? Yes. Is it 100%? No," Bloomberg quotes Ms. Simovic as saying. As previously reported in the Troubled Company Reporter - Europe, the Financial Times said, NMC, the largest private healthcare provider in the UAE, was once a rising star on the London Stock Exchange but it collapsed spectacularly earlier this year as it disclosed billions of dollars in unreported debt. Creditors placed it into administration in April. PIZZAEXPRESS: Creditors Set to Vote on CVA Proposals on Sept. 4 --------------------------------------------------------------- Reuters reports that PizzaExpress has decided to close 73 of its 449 UK restaurants due to coronavirus lockdowns and higher costs, a move that one of the country's best known restaurant chains said would impact 1,100 jobs. According to Reuters, the company said rental costs have become unsustainable and launched a company voluntary arrangement (CVA) to improve its finances by cutting rental agreements and temporarily moving from quarterly to monthly rents. PizzaExpress said it would seek approval for the CVA proposals from its creditors on Sept. 4, Reuters relates. The group had said earlier this month that 166 of its restaurants are now open and further reopenings are under way, Reuters notes. Earlier this month, Chinese buyout firm Hony Capital decided to cease control of PizzaExpress, which it bought for GBP900 million (US$1.19 billion) in 2014, to creditors in a debt-for-equity swap, Reuters recounts. TATA STEEL UK: S&P Withdraws B Issuer Credit Ratings ---------------------------------------------------- S&P Global Ratings said that it has withdrawn its 'B' long-term and short-term issuer credit ratings on Tata Steel UK Holdings Ltd. (TSUKH), at the company's request. TSUKH is a Europe-based steel producer. The outlook on the long-term rating was negative at the time of the withdrawal. VITEC GROUP: Egan-Jones Lowers Senior Unsecured Ratings to BB ------------------------------------------------------------- Egan-Jones Ratings Company, on August 10, 2020, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by The Vitec Group PLC to BB from BBB-. Headquartered in the United Kingdom, Vitec Group plc manufactures and supplies camera mounting, lighting support, and ancillary equipment and camera systems. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2020. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000. * * * End of Transmission * * *